FolioInvesting Review – A Look At This Brokerage For Long-Term Investors

FolioInvesting is an extremely impressive brokerage designed for long-term investors. The platform combines many of the best features of an automated investment platform with the best features of a stock brokerage, giving investors simple options with plenty of room to customize their investments. The only downside to FolioInvesting is that the platform is expensive compared to traditional low-cost brokerages – although the pricing is competitive compared to automated investment platforms. 

Note: As of December 2020, FolioInvesting has discontinued its service. We recommend checking out reviews of other robo-advisors. You can also check out our robo-advisor case study to see how well robo-advisors perform.

FolioInvesting Pricing Options

FolioInvesting offers two plan tiers.

The Basic plan gives you access to all of FolioInvesting’s features, including ready-to-go portfolios and brokerage services. With this plan, you pay per trade – $4 per window trade (orders held for up to several hours and then executed in bulk) or $10 per market order. On top of that, the plan costs $15 per quarter, which is waived if you make four or more trades during that quarter.

The Unlimited plan reduces the cost of trading in exchange for a higher base fee. You get 2,000 commission-free window trades each month (window trades are $0.50 per trade beyond 2,000) and $3 market orders. This plan charges a base fee of $29 per month or $290 per year. A free 60-day trial of the Unlimited plan is included when you open a FolioInvesting account.

For both plans, there are no account or trading minimums. In addition, you can have multiple accounts – for example, a traditional investing account and an IRA – without paying a second plan fee.

FolioInvesting Features

Ready-to-go Portfolios

The single most important advantage that FolioInvesting has over traditional brokerages is the platform’s ready-to-go portfolios. These portfolios are designed for diversification and span a wide range of investing goals and styles. In all, FolioInvesting has around 160 ready-to-go portfolios divided into classes such as Target Date folios (ideal for retirement investing), industry-specific folios, bond folios, geographic folios, and more.

The returns on these portfolios vary, but 4-7% since inception (many of them precede the 2008 financial crisis) is common. One-year performance is often higher, between 5-22% depending on the portfolio aggressiveness and industry.

Unfortunately, investing in ready-to-go portfolios does incur a commission for Basic plan subscribers or for Unlimited plan subscribers trading outside the twice-a-day windows – but it’s a commission for a single trade, rather than tens of individual trades. Some portfolios are adapted for Basic plan subscribers to offer maximum diversification with the fewest trades – and FolioInvesting does a good job of pointing investors to these folios. There are no minimum investments for any read-to-go portfolio.

Full-service Brokerage

Beyond offering ready-to-go portfolios, FolioInvesting is a full-service brokerage. You can trade any US stock, hundreds of ETFs, and around 1,100 mutual funds with FolioInvesting. Just as with any other brokerage, you can place stop-loss and limit orders – just beware that they will incur commissions as out-of-window trades.  

One of the interesting things that FolioInvesting allows you to do is to invest by dollar amount rather than shares. That means you can buy partial shares of any stock or ETF, which can be very helpful if you are trying to diversify your portfolio with a small amount of money. This is enabled by the window trading strategy that FolioInvesting uses, in which orders are pooled and held until they can be executed in a group. Typically, window trades are executed twice per day and execute within an hour or so of initiation.

Importantly, the fact that FolioInvesting serves as a stock brokerage allows you virtually unlimited customization potential to supplement any ready-to-go portfolio. This is a major advantage over most automated advising platforms, which place a lot of limits on what you can invest in. With FolioInvesting, essentially the only limit is that you can only have up to 100 positions in each of your portfolios – but you can create an unlimited number of portfolios with your account.

Long-term Investment Tools

FolioInvesting further adapts its platform for long-term investors by offering several useful tools common to automated investing platforms. 

The first of these is tax-loss harvesting. The platform provides 10 automated strategies to minimize or maximize your capital gains liability at the end of the fiscal year. If you choose one of these strategies, FolioInvesting will automatically execute trades to reach the desired outcome – beware of commissions, though, if you don’t have an Unlimited plan.

Interestingly, FolioInvesting also gives you a tool, called the Tax Football, to do your own tax-loss harvesting. This tool takes some study to use, but you can essentially create your own automated strategy for determining your tax liability. While most investors won’t want to bother with this – it’s pretty in the weeds and entails potentially hundreds of dollars in commissions – it’s nice that FolioInvesting gives you the option to manually do what most other automated investing platforms do without telling you.

FolioInvesting also gives you the option to set automatic monthly deposits from your bank account into specific portfolios. This is great for those who want to save money over the long term but can’t always remember to make transfers.

FolioInvesting Platform and Layout

Unfortunately, FolioInvesting’s platform isn’t the cleanest or most modern design. The platform relies heavily on displaying information in tabular formats and is light on visuals. That’s great for investors who want to dig into their financial data, but it’s not as welcoming for investors who are considering making the switch from a fully automated investment service – which tend to be heavy on visuals and light on actual information.

Still, FolioInvesting isn’t hard to get used to using. It’s easy to navigate between tabs and the order process is relatively clear. While FolioInvesting does offer some stock evaluation tools, these are pretty limited – investors who are looking outside the ready-to-go portfolios will want to do their own stock research using another platform or service.

Platform Differentiators

FolioInvesting sits at the intersection of robo-advisors and traditional brokerages. The platform offers most of the services of low-cost brokerages, including access to trade all US stocks, ETFs, and mutual funds. But, it also offers ready-to-go portfolios that resemble the options you’d find on a robo-advisor, as well as automated monthly deposits and tax-loss harvesting.

What sets FolioInvesting apart on this front is that you can endlessly customize any ready-to-go portfolio by supplementing it with individual stocks or ETFs. Plus, you get complete control over often-automated processes like tax-loss harvesting. Notably, FolioInvesting’s commission- and flat fee-based pricing scheme is also far less costly over time for retirement investors than a percentage-based account management fee. 

What Type of Trader is FolioInvesting Best For?

FolioInvesting present an impressive platform for investors who want access to the pre-diversified portfolios offered by automated investing, but who also don’t want to lose control over their investments. The platform’s ideal investor has a dedicated amount of money locked in preset portfolios, while the remainder of that money can be used for supplemental investments or aggressive stock picks. The fact that FolioInvesting allows you to create multiple portfolios within each account seems to further encourage this style of mixed manual and automated investing.

Still, it’s worthwhile to do the pricing math before diving into FolioInvesting. If you don’t need all your assets at a single brokerage, it may be much more cost-effective to split your investments between a low-cost robo-advisor and a low-cost brokerage. Ultimately, how significant the monthly or quarterly fee is with FolioInvesting compared to the percentage-based fee of a robo-advisor comes down to how much you plan to invest.

Pros

• Over 160 ready-to-go portfolios
• Endless customization with full-fledged brokerage
• Flat-fee pricing rather than percentage-based pricing
• Extensive tools for tax-loss harvesting
• Cheap commissions for window trading
• Enables buying fractional shares

Cons

• Platform is light on visuals and graphics
• Some automated features entice you into paying numerous commissions